The momentum of the overall stabilization of the construction machinery industry is still continuing. Since the second half of 2016, the industry’s heat has been heating up, and the construction machinery products on the market have swept away the downturn in the past. In April and May of 2018, some key products even reached a difficult situation, the industry peak ten years ago. The scene reappears.
According to statistics, this year’s loader sales in the first quarter exceeded 30,000 units, an increase of 2.5%. In March, 3,100 loaders were exported, an increase of 132.21% compared with February, which was the highest monthly sales since 2017. Large-scale excavators sold 5,200 units, up 9.2% year-on-year, medium-sized excavators sold 11,257 units, up 24.0% year-on-year; small excavators sold 25,427 units, up 27.5% year-on-year. In terms of bulldozers, the main bulldozer manufacturers in China sold 1010 bulldozers in March, a 142% increase from the previous month.
The quarterly data from listed companies also confirmed the industry’s good operating trend, and many of the heavyweight companies achieved a high growth rate. Xugong Machinery’s operating income in the first quarter was 14.42 billion yuan, a year-on-year increase of 33.72%. Liugong achieved revenue of 4.865 billion yuan in the first quarter, up 8.78% year-on-year; net cash inflow from operating activities was 501 million yuan, a year-on-year increase of 534.26%. Sany Heavy Industry achieved revenue of 21.295 billion yuan, a year-on-year increase of 75.14%. Zoomlion achieved revenue of 9.017 billion yuan, up 41.76% year-on-year. Overall, the construction machinery market was in a good position in the first quarter, and the performance of leading companies increased steadily.
Multi-factors promote the overall upward movement of the construction machinery industry
“After years of industry adjustment, from product to dealership, they have undergone major changes. Now, some old equipment is being phased out, and some new dealers are re-entering the industry, plus the capacity to go in the past few years. Destocking is relatively thorough, and these factors are the direct cause of the surge in product sales.” A related person in charge of a certain industry told reporters.
At present, benefiting from the country’s sustained and stable investment in fixed assets, as well as the initial achievements in industrial transformation and upgrading and high-quality development, the coverage of new technologies and new products in the construction machinery industry continues to expand. In addition, driven by the market product renewal cycle, with the continued high pressure of environmental protection policies, the market demand for new machines has been further increased.
According to market analysis, from January to February of 2019, China’s infrastructure construction investment has increased by 2.50% year-on-year. Since July 2018, it has returned to more than 2%, showing a bottom rebound. In March 2019, with the gradual landing of infrastructure policy, infrastructure investment will continue to pick up, which will effectively drive the growth of construction machinery.
At present, the willingness to build real estate enterprises is strong. According to statistics, from January to February this year, the cumulative investment in real estate development in the country was 1.21 trillion yuan, a year-on-year increase of 11.6%, an increase of 2.1 percentage points over the whole year of 2018. Affected by the year-on-year increase in new construction in 2018, in March 2019, the growth rate of real estate construction area is expected to continue to pick up, which will effectively support the sales of construction machinery.
Based on the above-mentioned comprehensive factors, it is expected that the whole industry will continue to grow in 2019, and the growth rate will be around 10%, which will be higher than GDP growth.
Overseas markets are becoming the competition strategy of leading enterprises
At this stage, the continued efforts of Chinese companies in overseas markets have also driven the development of products in the construction machinery industry to some extent. Data show that in March this year, Xugong brand exports exceeded 100 million US dollars.
According to data from Liugong, the current infrastructure needs of countries along the “Belt and Road” are strong. In 2018, Liugong continued to advance the pace of internationalization and adhered to the “One Belt, One Road” development policy. It has achieved basic coverage for countries along the “Belt and Road” and has reached 85% coverage in 65 core countries. It is understood that the company continues to adopt a marketing strategy that focuses on overseas core countries and key customers, bringing new sales growth points. In 2018, the company’s total overseas sales revenue increased by 30% year-on-year. Among them, excavator overseas sales increased by 37% year-on-year, and sales revenue increased by 41%.
In this regard, Liu Guangan, chairman of Liugong Group, said in an interview with the media not long ago that in the past few years, Liugong has been growing outside the market in China. The “Belt and Road” initiative is not only important for Liugong, but also important for all “Belt and Road” countries. Therefore, for Liugong, more areas will be covered in the future.
There is no shortage of peers in the overseas journey. Although Sany opened up overseas markets earlier, it seems that there are as many difficulties and achievements. At present, Sany Heavy Industry is also constantly adjusting its strategic focus, trying to increase the growth of overseas markets, speed up export growth with international means, and open up the company’s long-term growth space. Specific details include accelerating the internationalization strategy, accelerating the company’s overseas market response and service capabilities, agent systems, service parts systems, and financing risk control systems.
As a fist product for overseas exports, Sany Excavator exported 6,392 units in 2018, an increase of 67.33% year-on-year; in the first three months of this year, it exported 1,934 units, a year-on-year increase of 49.34%, and continued to maintain high growth. Some analysts pointed out that the company hopes to expand its overseas market and open up long-term growth space, while the continuous growth of export revenue is expected to smooth the impact of domestic cyclical fluctuations.
Global market demand as a whole enters a new stage of growth
At present, the concentration of the construction machinery industry is constantly improving. The sales growth rate of leading enterprises’ construction machinery products outperformed the overall growth rate of the industry, and the market share continued to climb. The improvement of industry concentration has positive significance for enhancing brand influence and competitiveness in overseas markets. However, while Chinese companies continue to make new breakthroughs overseas, the global engineering machinery giant also showed a good transcript.
Not long ago, the Liebherr Group announced its operating data for the fiscal year 2018. The Group’s turnover in 2018 was 10.051 billion euros ($11.85 billion), an increase of 7.5% or 739 million euros ($830 million). Among them, sales of construction and mining equipment segment increased by 10.8% to 6.833 billion euros ($7.73 billion). The growth of mobile cranes, earthmoving and mining equipment has led to the outstanding performance of the sector.
Related statistics show that Caterpillar’s total sales revenue for the first quarter of 2019 was $13.466 billion, an increase of $607 million from the first quarter of 2018 of $12.859 billion, a growth rate of 5%. Earnings per share of $3.25, a record for the first quarter, compared with the first quarter of 2018 earnings per share of 2.74 US dollars increased by 19%. This increase was mainly due to increased sales due to increased demand for equipment and services. In addition, sales of construction machinery have also increased, while energy and transportation are flat.
In Volvo, the market performed strongly in the first quarter of this year, with sales up 15% year-on-year. In the first quarter, Volvo Construction Equipment’s sales increased to S$24.1 billion (US$2.5 billion), a year-on-year increase of 15%, operating income increased to SEK 3.646 billion (US$381 million), an increase of 26% year-on-year, and equipment delivery. It has increased to more than 23,100 units, an increase of 5% over 22,100 units in 2018.
It is understood that the reason for the steady growth of foreign brands is the stable market conditions in most regions. In addition, rising sales, rising equipment prices and wider product applicability have also had a positive impact on revenue.
Liebherr said that the main factor driving the growth of revenue in 2018 is the increase in demand in the European market, especially the German economy’s growth again and the positive performance of the French and British markets. Other notable positive contributors are the United States, Australia and China. Looking ahead, sales revenue is expected to increase further in 2019, and there will be no signs of an upcoming recession.
Construction machinery is undergoing a new round of recovery. In the second half of 2011, the original hot market suddenly turned down and was bleak. This situation has been maintained for five years. During the period, the entire industry was as cold as a “glacier”. Overcapacity and disorderly competition filled every corner of competition. Now, there are signs that this momentum is still likely to come back. To this end, some insiders have warned that the signs of unfair competition may prompt sales growth to slow down, so construction machinery companies should be vigilant. In addition, some industry professionals have told reporters that Sino-US trade frictions and the RMB exchange rate issue may affect the development of overseas markets.
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Post time: May-14-2019